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Election speculation and trade talk news lifted GBP/USD by 1% across the previous week. The pound US dollar exchange rate pierced US$1.29 rallying to a two-week high of US$1.2921, before easing slightly to close the week at US$1.2027. The pair has jumped higher on Monday as it targets US$1.30.
Despite weak UK macro data across the previous week, the pound advanced as investors remained consumed by the UK general election, which is just over three weeks away, and what its result will mean for Brexit.
The pound was well supported as the Brexit Party failed to file candidates in 43 seats, in addition to those which the party had already said that it wouldn’t stand candidates against Conservative held seats. This move means that the Conservatives have more of a chance of winning by a strong majority. A clear win by the Tories would give Boris Johnson the power he needs to push Brexit quickly through Parliament.
This week Boris Johnson will go head to head versus leader of the opposition Jeremy Corbyn in a live televised debate. Currently Boris Johnson is comfortably ahead in the polls. However, should Jeremy Corbyn walk away from the debate with more support, the pound could take a hit.
FOMC Minutes The Key Dollar Event This Week
The US dollar largely under performed versus its peers across the previous week. The dollar gave up most ground in the second half of the previous week following Federal Reserve Chair Jerome Powell’s testimony before Congress and on US — Sino trade talk headlines.
Fed Chair Powell was upbeat over the health of the US economy when he spoke before Congress, which could warrant a tighter monetary policy. However, Jerome Powell was adamant that the Fed considered the current policy appropriate. The fact that the Fed was still not any closer to tightening policy disappointed investors.
White House Adviser Larry Kudlow boosted optimism of a US — China trade deal, lifting risk sentiment. This was supported by a report on Sunday from Chinese state media that the two sides had constructive talks The improved risk appetite hit demand for the safe haven dollar.
The US economic calendar is relatively quiet this week. Wednesday sees the release of the minutes to the latest Federal Reserve policy meeting. Should the minutes continue with the theme that current policy is appropriate, the dollar could slip lower.
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| What do these figures mean? |
| When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written: 1 GBP = 1.28934 USD Here, £1 is equivalent to approximately $1.29. This specifically measures the pound’s worth against the dollar. If the US dollar amount increases in this pairing, it’s positive for the pound. Or, if you were looking at it the other way around: 1 USD = 0.77786 GBP In this example, $1 is equivalent to approximately £0.78. This measures the US dollar’s worth versus the British pound. If the sterling number gets larger, it’s good news for the dollar. |
